Hedge Funds Are Bullish On Encore Wire Corporation (WIRE)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Encore Wire Corporation (NASDAQ:WIRE).

Is Encore Wire Corporation (NASDAQ:WIRE) the right pick for your portfolio? Money managers were betting on the stock. The number of long hedge fund positions moved up by 1 in recent months. Encore Wire Corporation (NASDAQ:WIRE) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 22. Our calculations also showed that WIRE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s view the recent hedge fund action surrounding Encore Wire Corporation (NASDAQ:WIRE).

Do Hedge Funds Think WIRE Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards WIRE over the last 24 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the number one position in Encore Wire Corporation (NASDAQ:WIRE), worth close to $31.4 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $11.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish include Charles Paquelet’s Skylands Capital, Israel Englander’s Millennium Management and Mark Lee’s Forest Hill Capital. In terms of the portfolio weights assigned to each position Skylands Capital allocated the biggest weight to Encore Wire Corporation (NASDAQ:WIRE), around 1.19% of its 13F portfolio. Forest Hill Capital is also relatively very bullish on the stock, earmarking 1.03 percent of its 13F equity portfolio to WIRE.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Tontine Asset Management, managed by Jeffrey Gendell, initiated the largest position in Encore Wire Corporation (NASDAQ:WIRE). Tontine Asset Management had $1.9 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new WIRE position is Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s go over hedge fund activity in other stocks similar to Encore Wire Corporation (NASDAQ:WIRE). We will take a look at Fresh Del Monte Produce Inc (NYSE:FDP), NBT Bancorp Inc. (NASDAQ:NBTB), Avid Bioservices, Inc. (NASDAQ:CDMO), WestAmerica Bancorp. (NASDAQ:WABC), Lakeland Financial Corporation (NASDAQ:LKFN), Mack Cali Realty Corp (NYSE:CLI), and SecureWorks Corp. (NASDAQ:SCWX). This group of stocks’ market caps match WIRE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $78 million in WIRE’s case. Avid Bioservices, Inc. (NASDAQ:CDMO) is the most popular stock in this table. On the other hand Fresh Del Monte Produce Inc (NYSE:FDP) is the least popular one with only 6 bullish hedge fund positions. Encore Wire Corporation (NASDAQ:WIRE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for WIRE is 79.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on WIRE as the stock returned 49% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.